Extension buys canola industry some time, but China still firm in its demands

The Canadian canola industry is in a tricky position when it comes to China, says Brian Innes, Vice President of Government Relations with Canola Council of Canada.

On the one hand China is Canada’s best customer for canola seed, taking about 40 per cent of our total export; on the other hand they are using that strong bargaining position to lay unreasonable expectations at the Canadian Canola industries’ feet.

“China has expressed that they want Canada to lower the amount of dockage in shipments because they believe it is linked to blackleg,” explains Innes.

“There is a difference of perspective, and in the research Canada has done jointly with China, it is has shown there would be no decrease in risk if we move to one per cent dockage from the current levels (about 2.5 per cent). Because there is no evidence lowering dockage would have any impact on blackleg, and because it is a measure that would impose significant costs on Canadian growers and the Canadian industry, the industry that I represent wishes to have a science based solution to these concerns.”

Because of the uncertainty surrounding this issue, Innes had hoped for a more substantial agreement to come out of Beijing when Canadian Prime Minister Justin Trudeau recently visited there. The Trudeau government did manage to get China to agree to a deadline extension beyond their original date of September 1 to allow more time to negotiate an agreement. However, says Innes, the longer those negotiations go on the more damage it will do to the Canadian canola industry.

“I think it is important to understand it is already creating difficulties for the Canadian industry and our growers,” explains Innes. “We have already seen exports to China have slowed and prices have fallen as a result. We have already seen without a solution that incomes have been reduced and uncertainty has been created for everyone in the value chain.”

Innes says the industry needs to get a stable, long-term, science-based agreement out these negotiations with China.

“Canola has been an incredible example of how we can take advantage of the growth opportunities in China and help supports jobs here in Canada. Getting this solution right, would really be very positive for the future of our relationship… Both countries have indicated they are working hard to find a solution. And we have seen that both governments have put action behind their words, and are working on a solution. But it’s important to get the right solution.”

If negotiations fail, and Canadian canola is ultimately blocked from getting into China, Innes says they are few options for canola producers and exporters in Canada.

“There has been discussions (on finding a new market this year),” confirms Innes. “Our other major customers for our canola seed, Japan and Mexico, take a consistent amount of canola, but there may be other more price sensitive markets that could take some canola. These are places like Pakistan, Bangladesh, United Arab Emirates and the European Union who might take more. There may also be some additional opportunities to process more in Canada; although our processing capacity is already operating near maximum capacity.

“But I think for the growers, to lose a market that takes 40 per cent of our canola seed exports, it’s difficult to see how you can replace that.”

Innes remains hopeful an agreement will be reached between Canada and China on canola.

“We have heard both countries express an interest in solving this issue,” says Innes. “This (one per cent dockage) would be very difficult to meet, if it could be met at all, by the Canadian canola industry on four million tonnes of exports; so it’s a significant issue for the competitiveness of all the growers in Canada and the whole canola industry.”